The next few years will be very bleak in terms of spending cuts, but the public sector has to find ways to mitigate their impact. Local scrutiny of budget decisions is more critical than ever
Public bodies including local authorities are being forced to cut their expenditure and consequently, to stop, reduce or significantly change a range of public services. Tragically, if inevitably, it seems that public expenditure cuts are going to continue for many, many years.
After several years of cuts and given the magnitude of those still to come, it is certain that future reductions are going to impact on core services including those for vulnerable people and communities facing some of the greatest challenges.
Of course, there will be opportunities for greater efficiency and some services will inevitably become redundant and no longer be required but the reality is that potentially harmful cuts are going to be unavoidable.
Accordingly, it is vital that public bodies, and most especially local authorities, adopt a rigorously strategic approach to budget management and their commissioning with a clear focus on outcomes. They also need to ensure that they are fully aware and informed of the likely impact, including unintended consequences, of their decisions.
Political management of expenditure must be precisely that – ‘political’, and led by politicians, directly accountable to the community. It should be underpinned and driven by clear ‘political’ (which means ‘choices’ and ‘preferences’) objectives and values, as much as any new investment should be.
Every local authority should have clear ‘politically’ determined objectives and values – set by the locally elected politicians and following honest and effective consultation with and involvement of local citizens, the local voluntary and community, and business sectors, faith groups, staff and their trade unions, and other local stakeholders.
They should then test every financial and policy decision, including expenditure reductions and cuts, charging policies and investment against these objectives and values. They should have the courage do this transparently (no closed meetings or secret reports) so that the public and other local stakeholders are fully able to participate and understand the implications of the decisions including the 'trade offs' made, and hold elected mayors and councillors to account. This is democracy in action.
It is also very important when taking budget-led decisions that local authorities and the wider public sector consider the long term implications. There may be pressure for expediency and short term cuts which may in fact not be in the public interest if they lead to longer term financial pressures including possibly unavoidable costs. These costs may be financial but sadly may also be human in terms of worsening life chance and quality of life for local people.
In any ‘place’, the economic impact of the public sector, collectively, is huge – a fact that is, more often than not, simply not appreciated. In terms of its direct and indirect expenditure, employment, and service and infrastructure support for local businesses, both socially and environmentally, its impact is enormous – and critical. Accordingly, when making budget decisions, any part of the local public sector should consider the implications for the social, economic and environmental well-being of local communities.
Equally, they should consider the implications of their decisions on other parts of the public sector. At a time of hard pressed and reducing budgets, there is no benefit or public value to be gained by intentional and unintentional, immediate or longer term ‘cost shunting’ between public bodies.
A programme of redundancies in the public sector has a negative economic multiplier effect on the local economy and local businesses, housing markets, public services, tax revenues and social security payments. No public body should make major redundancy decisions without first undertaking an economic and social impact analysis, taking this into account in the final decision making process and publishing it alongside the basis for the redundancy decision.
Clearly, this requires co-ordination of local public sector budget and policy management across agencies in the same place. It requires Whitehall and its local representatives to participate, as well as local agencies including schools and academies.
‘Community Budgets’ provide some opportunity for more ‘joined-up’ budget planning but even where there are no such arrangements, there must be co-ordination. This may be more difficult as a result of the increased fragmentation of the public sector arising from recent police, NHS and education reforms but it is, nevertheless, still possible. Indeed, as a result of these structural changes, it is more necessary than ever before.
Thankfully increasing numbers of local authorities are adopting ‘place shaping’ and ‘leadership of place’ roles. To this end, they have a clear responsibility to make real this leadership by:
• agreeing a long term vision and strategy for the place
• persuading their public sector colleagues to adopt standard social, economic and environmental impact measurement for assessing potential budget and policy decisions, and then for measuring their actual impact and their contribution (whether negative or positive) to the agreed long term strategy of the place
• creating in as non-bureaucratic a manner as possible local architecture to co-ordinate budget, policy and strategic commissioning decisions across the public sector
• ensuring that decisions taken by such bodies do not disproportionately impact on particular neighbourhoods or sections of the community
• adopting common and integrated consultation arrangements
• involving the local voluntary and community sector, staff and trade unions and other local stakeholders (including the business community) in these processes on a consistent basis across place and public agencies
• applying the principles of the Public Services Social Value Act to their own behaviours, spending and actions on the same basis as applying it to external providers
These proposals have a local place focus but the same principles should apply to central government too. There needs to be an independently audited impact analysis of expenditure and policy decisions.
With that in mind, the recently published Fabian Society ‘2030 Vision’ report of the Commission on Public Expenditure has proposed an enhanced role for the ‘Office of Budget Responsibility’.
Local authorities and their partners could adopt a similar approach locally and use their scrutiny powers and arrangements as a means of testing and evaluating local budget plans, decisions and enactments.
The next few years will be very bleak in terms of budget reductions but the public sector has to act responsibly and find ways of mitigating the impact of the cuts. Of course, there will be some horrendous negative impacts - but the public is entitled to know what they are likely to be, now and in the future too. The public sector also has to be ready to innovate and find the means to fund new initiatives to meet public need and aspiration
Political leadership pursuing political goals and underpinned by political values that is fully accountable is essential. I would hope that the majority of local authorities would set their political compass to security: greater equality; reducing poverty and social disadvantage; social justice; long term economic, social and environmental sustainability; job creation and other specific related goals. This being so, all their decisions, actions and consequential outcomes must be judged against these goals in way that improves both decision making, accountability and outcomes.
